CenturyLink Has Sold Its Data Centers, But Still Offers Cloud And Co-Location Services With The Help Of Partners

CenturyLink closed its data center deal to sell 57 of its facilities to a consortium led by investment firm BC Partners. But that doesn't mean CenturyLink is walking away from co-location or cloud services.

"We're still in the managed IT and hosting services business. While we sold the co-location business, we are still reselling co-location as well as our cloud capabilities," Dean Douglas, CenturyLink's president of sales and marketing told CRN. "We'd love to continue working with partners on our cloud offerings."

The Monroe, La.-based carrier announced in November that it would sell off its data centers and co-location business for $2.15 billion to a group of funds advised by BC Partners. The consortium includes BC Partners, Medina Capital Advisors and Longview Asset Management. The group has formed a new, global secure infrastructure company called Cyxtera Technologies, using CenturyLink's data center assets.

[Related: CenturyLink Announces New Leadership Team To Follow The Level 3 Acquisition]

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Cyxtera Technologies will be mostly made up of CenturyLink's 57 data centers and co-location business. CenturyLink has approximately a 10 percent stake in the new infrastructure company and is currently Cyxtera's largest customer. This equity will still allow CenturyLink and its partners to continue to sell co-location services in these data centers, Douglas said.

CenturyLink's channel executive team reports to Douglas.

Douglas added that CenturyLink's network is its biggest differentiator, not owning physical assets.

The new data center ownership won't change how CenturyLink partners procure and sell cloud services because CenturyLink will still be leasing space within these facilities for their cloud offerings, said John Hudson, director of service provider solutions for Lumenate, a Dallas-based IT consulting firm and CenturyLink partner.

"This is a continuation of the consolidation we are seeing in the cloud industry. Whoever owns the real estate is of no consequence to our business," Hudson said.

Partners can choose to procure cloud and data center services through CenturyLink, or they can also choose to work directly with Cyxtera, Douglas said.

CenturyLink announced its intent to acquire fellow service provider Level 3 for $34 billion in a deal the company expects to close during Q3 2017. Level 3 has 350 data centers that CenturyLink would be acquiring as a result, but less than ten of the facilities – most of which are located in Latin America and Europe – are considered to be Tier 3 data centers. These facilities will not be handed over to Cyxtera.

"The overwhelming majority of the data centers that Level 3 has are network [Points of Presence] PoPs, so we don't think it will be viewed as a competitive proposition," Douglas said.

In addition to the equity stake, CenturyLink has received approximately $1.86 billion in pre-tax net cash proceeds, which are subject to certain post-closing adjustments. CenturyLink said that the net after-tax proceeds from the sale would partially fund its Level 3 acquisition.

CenturyLink is holding onto its hosting and network operations assets, and the company said that it remains committed to delivering advanced networking, communications, and IT services, including cloud, managed hosting and cybersecurity.

"We have a foot in the IT camp and a foot in the communications camp, because we think it's important to bridge both those industries to address hybrid IT," Douglas said.

BC Partners and Medina Capital said they intend to make Cyxtera Technologies stand out in the cloud infrastructure market by pairing the data centers with cyber security. To that end, the investment firms also recently acquired cyber security companies Cryptzone, Catbird, Easy Solutions, and Brainspace in November.